Are Disadvantaged Bidders Doomed in Ascending Auctions?
AbstractA bidder is said to be advantaged if she has a higher expected valuation of the auction prize than her competitor. When the prize has a common-value component, a bidder competing in an ascending auction against an advantaged competitor bids especially cautiously and, hence, the advantaged bidder wins most of the time. However, contrary to what is often argued, a disadvantaged bidder still wins with positive probability, even if his competitor.s advantage is very large and even if the disadvantaged bidder has the lowest actual valuation ex-post. Therefore, the disadvantaged bidder has an incentive to participate in the auction, and the presence of a bidder with a small advantage does not have a dramatic e¤ect on the seller.s revenue.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 169.
Date of creation: 01 Nov 2006
Date of revision:
Publication status: Published in Journal of Industrial Economics, 2008, Vol. 56, 3, p. 683.
common-value auctions; asymmetric bidders;
Other versions of this item:
- Marco Pagnozzi, 2008. "Are Disadvanteged Bidders Doomed In Ascending Auctions?," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 683-683, 09.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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